The State of AI Governance in Canada

The State of AI Governance in Canada

What Every Canadian Business Owner Needs to Know in 2026

By Bob McTaggart

Artificial intelligence is moving faster than the laws designed to govern it.

No surprise to us.

We've seen this before.

The internet arrived before privacy legislation matured. Social media grew faster than governments could regulate it. Cybersecurity evolved from an IT issue into a boardroom responsibility over the better part of two decades.

I believe artificial intelligence is following exactly the same path.

Today, governments are introducing legislation, regulators are publishing guidance, insurers are paying closer attention, procurement departments are asking tougher questions, and the courts are beginning to consider cases involving artificial intelligence.

None of this will be settled overnight.

In my opinion, we're at the beginning of a process that may take the better part of a decade before the legal framework matures.

That isn't a reason to wait.

It's a reason to begin.

AI Is Already in Your Business

Many business owners still ask whether they should be using artificial intelligence.

I think that's yesterday's question.

The better question is whether AI is already being used inside your organization.

The answer is almost certainly yes.

Employees are using ChatGPT to write emails.

Microsoft Copilot is helping prepare reports.

Marketing teams are creating social media content.

Sales staff are researching prospects.

Developers are writing code.

Customer service teams are drafting responses.

Accountants are summarizing information.

Engineers are accelerating design work.

Whether leadership approved it or not, artificial intelligence has quietly entered the workplace.

Ignoring that reality doesn't reduce risk.

Understanding it does.

Canada's Direction Is Becoming Clear

Earlier this year, the Government of Canada launched AI for All, its national strategy designed to encourage responsible AI adoption while strengthening Canada's position as a global leader in artificial intelligence.

Notice the emphasis.

The discussion is no longer about whether Canada should embrace AI.

That decision has largely been made.

The focus is now shifting toward using artificial intelligence responsibly while maintaining public trust.

At the same time, governments continue examining privacy legislation, consumer protection, employment law, competition law and sector-specific regulation to determine how existing legal frameworks apply to AI-enabled organizations.

Rather than expecting one single law to answer every question, businesses should expect AI governance to develop through several channels at once:

• legislation;

• regulatory guidance;

• court decisions;

• procurement requirements;

• insurance expectations;

• industry standards; and

• evolving best practices.

That has happened before.

It's how governance normally evolves.

The EU AI Act Matters More Than Many Canadians Realize

One of the biggest misconceptions I hear is this:

"We don't do business in Europe."

That may not matter.

The European Union's AI Act has an extraterritorial reach similar to what we saw with GDPR.

If your products, services or AI systems are used within the European Union—or you supply organizations that operate there—you may find yourself expected to meet European governance requirements.

Even businesses with no direct European customers may feel the effects.

Large multinational organizations rarely want one governance standard for Europe and another for Canada.

It's much simpler for them to require every supplier to meet the same expectations.

That means Canadian businesses increasingly encounter questions about AI governance long before a Canadian regulator asks them.

Customers Are Becoming the First Auditors

One of the most significant changes isn't coming from government.

It's coming from customers.

Organizations are beginning to ask suppliers questions that would have seemed unusual only a year ago.

Do you have an AI policy?

How do employees use AI?

Can confidential information be entered into public AI systems?

Who reviews AI-generated content?

How do you reduce bias?

Can you demonstrate human oversight?

Can you explain how important decisions are made?

If those questions sound familiar, they should.

Twenty years ago, cybersecurity questionnaires began appearing in procurement packages.

Today they're routine.

I believe AI governance questionnaires are following the same path.

Insurance Companies Are Paying Attention

Insurance has always been about uncertainty.

When new risks emerge, insurers try to understand them before deciding how to price them.

Artificial intelligence is no different.

No one should expect insurers to eliminate risk.

What they are likely to reward is organizations that can demonstrate thoughtful management.

Good governance doesn't guarantee something won't go wrong.

It demonstrates that leadership acted responsibly.

That matters.

What Good AI Governance Actually Looks Like

Many people imagine AI governance as complicated documentation and expensive software.

I don't.

Good governance starts with management.

Know where AI is being used.

Understand what information employees are sharing.

Decide where human judgment must remain part of the process.

Train people.

Review important outputs before they become business decisions.

Document your approach.

Review it regularly.

Improve it over time.

None of that requires perfection.

It requires leadership.

Where I Believe Things Are Heading

In my opinion, AI governance will become a normal business discipline.

Not because governments force it.

Because customers expect it.

Business partners expect it.

Insurers expect it.

Boards expect it.

Employees expect it.

Trust has always been a competitive advantage.

Artificial intelligence simply makes trust easier to lose—and more valuable to earn.

I also believe we're moving beyond conversations about "Human-in-the-Loop."

Organizations need meaningful human oversight.

Not someone clicking "Approve."

Not someone reviewing thousands of AI-generated documents they couldn't possibly read.

Real oversight means informed people exercising professional judgment where it matters most.

Technology should support decision-making.

It should never replace accountability.

Five Things You Can Do This Month

You don't need to wait for another law.

You can begin today.

1. Identify where AI is already being used.

You may discover far more AI inside your organization than you expected.

2. Create a practical AI Use Policy.

It doesn't need to be fifty pages.

It needs to be understood.

3. Decide where human review is mandatory.

Not every decision carries the same level of risk.

Some require meaningful human involvement.

Define those now.

4. Train your managers.

Technology changes quickly.

Leadership responsibilities don't.

Managers need to understand both.

5. Start documenting governance decisions.

Documentation demonstrates good-faith management.

If someone asks six months from now what your organization did, you'll have an answer.

Moving Forward From Today

Artificial intelligence isn't waiting for governments to finish writing legislation.

It's already changing how Canadian businesses operate.

Over the next several years we'll see new legislation introduced.

Some laws will be challenged.

Regulators will issue new guidance.

Insurance companies will refine their underwriting.

Customers will continue asking tougher questions.

That's normal.

It's how every major governance framework has developed.

The organizations that succeed won't be the ones trying to predict every legal outcome.

They'll be the organizations that build a culture of responsible innovation.

They'll understand where AI is being used.

They'll keep people involved in important decisions.

They'll document their thinking.

They'll adapt as expectations evolve.

Most importantly, they'll recognize that governance isn't about slowing innovation.

It's about building enough trust that innovation can continue with confidence.

I believe that's where Canadian business is heading.

And I believe organizations that start today will have a significant advantage over those waiting for the legal landscape to settle.

Editor's Note

Artificial intelligence governance is evolving rapidly. This article reflects publicly available legislation, regulatory guidance, government announcements and publicly available information available at the time of publication. Court decisions, future legislation and regulatory interpretations will continue to shape AI governance in Canada over the coming years.

Legal Disclaimer

This article is provided for educational and informational purposes only and reflects the author's opinions based on publicly available information available at the date of publication. It is not intended to constitute legal, regulatory, insurance or professional advice. Artificial intelligence legislation, regulatory guidance and judicial interpretation continue to evolve. Readers should seek advice from qualified legal, privacy, regulatory or insurance professionals before making decisions regarding compliance or governance. References to legislation, government initiatives and international frameworks are intended to promote awareness and should not be interpreted as definitive statements of legal obligation.

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